Hulu Makes Play for 2012 Political Dollars as TV Ad Prices Heat Up

With ZIP-Code-Level Targeting, Video Site Appeals to Candidates in Multiple-District Media Markets

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TV continues to be the sledgehammer of political campaigns, with even the most digital-oriented candidates, like Scott Brown, who ran for a Senate seat in Massachusetts in 2010, only spending about 10% of their media budgets online. But that percentage is expected to inch upward in the 2012 election cycle, and sites like Hulu stand to benefit as media buyers look to buy political spots in competitive districts in expensive media markets.

President Obama was the first political candidate to buy time on Hulu in 2008.
President Obama was the first political candidate to buy time on Hulu in 2008.
Barack Obama was the first political candidate to buy time on Hulu in 2008, and his campaign organization, Obama for America, placed spots on the online TV service through the end of October to promote the president's jobs bill. High-profile candidates like Deval Patrick, Ted Strickland and Meg Whitman also ran ads on Hulu during the 2010 mid-term election, but at the time Hulu wasn't really set up for the needs of political campaigns.

Hulu had pricey campaign minimums and longer turn-around for ads -- fine for brand advertisers, but barriers for campaigns and consultants who want to buy more targeted spots in districts and typically want them to run right away. But now the company is focused on courting political agencies in 2012, armed with statistics to show that its audience is politically engaged. September ComScore data says 80% of eligible voters on Hulu cast a ballot in both the 2010 mid-term election and 2008 presidential election.

Hulu is considerably more expensive than YouTube, which has been an established political battleground since President Obama and John McCain advertised heavily on it in 2008, paying roughly $8 to $9 CPMs for traditional in-stream video ads. However, many political consultants are intrigued by the prospect of Hulu's highly attentive audience coupled with ZIP-code targeting capability -- which could come in handy in gerrymandered districts that fall into multiple TV broadcast zones, where congressional candidates are accustomed to making buys to reach a relatively small segment of local voters.

"If you think of a market like Philadelphia that has several congressional districts in it, there's a lot of waste associated with buying broadcast, and sometimes it's cost-prohibitive," said Paul Winn, political director for the Republican media-buying firm Smart Media Group, which has been doing buys on Hulu ranging from $50,000 into the six figures for statewide candidates since 2010. For the 2012 cycle, he says the firm intends to buy on Hulu for congressional candidates as well, and the pricing is competitive in expensive TV markets.

Hulu could be a major factor as early as the Jan. 10 New Hampshire Republican presidential primary as an alternative to the local Manchester TV station WMUR, which historically has been in the position of naming its price for political advertising in the days leading up to a primary since most of the state falls in the Boston DMA, said Brad Todd, a partner at On Message, digital and media agency-of -record for the National Republican Congressional Committee.

Mr. Todd lumps Hulu together with MLB.com and ESPN3.com as sites offering premium video content where viewers are most likely to watch advertising in its entirety and that most stand to benefit from the uptick in political spending online. He anticipates making buys on the platform for several key House races next year.

"It's not crazy to pay a $40 to $45 CPM for prime programming," he said, though he noted that Hulu would be a less cost-effective option in smaller markets where TV buys are more affordable.

"The idea of paying a really high CPM isn't that bad if in fact you're able to shave off that 90% inefficiency with zip-code targeting, which makes it very competitive [with TV], impression for impression," said Josh Koster, managing partner of the Democratic agency Chong & Koster.

While TV is still king, likely voters' media-consumption habits are changing. According to a September study commissioned by SAY Media and political agencies Targeted Victory and Chong & Koster, 31% of likely voters in battleground states hadn't watched "live TV" -- meaning programming seen without a delaying device like a DVR—in the week prior to being polled last spring.

Still, there are barriers outside of cost that could keep political advertisers from embracing Hulu. While the company touts its young and affluent audience (the average household income of viewers of the free, ad-supported offering is $74,000, according to Hulu Senior VP-Advertising Jean-Paul Colaco), that doesn't necessarily resonate with political consultants, since younger people are less likely to vote. And in many cases Hulu will not let advertisers buy individual shows, though advertisers can "blacklist" programming they explicitly don't want.

"They have to be able to deliver programming precisely," said Mr. Todd of On Message, who thinks Hulu's long-term growth depends on whether it can serve up sought-after shows like "30 Rock."

Interest in Hulu in the coming election cycle reveals a certain degree of agnosticism about where spots get seen, but there's still a consensus among consultants that no one can afford to skimp on TV.

"Broadcast is still the million pound gorilla in the media mix, and I'm as much of a digital evangelist as anyone," said Republican media strategist Rick Wilson, who's about to use Hulu for the first time for a public-affairs campaign.

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